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Keep your Credit in Check: Staying Active

Credit history

You probably have not thought about the credit card located in your drawer or at the back of your wallet- the one that was recently paid off and has been abandoned for some time. Although you most likely haven’t been using this card, probably due to the lender or creditors’ policies, your account may be considered “inactive” and eventually be closed.

Keep in mind that it is vital to show that you cater to your financial commitments responsibly when it comes to credit. A part of that is by showing your lenders or creditors that you can handle your card responsibly by paying them on time, every time, and regularly.

If you haven’t been using the credit card, do you think the cancellation will impact you? Your answer to this depends on various factors. We are going to explain some of the few things you should know about account inactivity.

How long will my account be considered inactive before it is closed?

The above question depends solely on the company. An account may be rendered inactive if there aren’t any new purchases on the card over a while. If possible, it is ideal to speak with the credit card company with whom you have an account. This will help you learn more about the policies on account of inactivity.

Will I get a notification before my account is closed?

Not mandatory. Credit card companies are not mandated to issue you any notice that they are closing your account. Although the Credit Card Act of 2009 stipulates that lenders and creditors are expected to provide customers with a 45 days’ notice, informing them of the significant changes being added to their account, this doesn’t apply to card cancellation notification due to inactivity.

Can this have any impact on my credit history?

Any cancellation on your credit card may affect you in the following ways:

  1. The cancellation on your card may adversely affect your debt to credit utilization ratio. This is the amount of credit used daily compared to the credit allocated to you. Lenders and creditors are interested in seeing a lower ratio of how much debt you have and not how much credit you have.\
  2. In addition, lenders and creditors are keen to see how reasonable and responsible you are handling different credit types. This may include credits cards and installment loans, to name a few. Having a single credit card that is closed may also affect the credit type, negatively affecting your credit scores.

Once your credit card is closed due to inactivity, you may lose accumulated rewards and card benefits. When you have a credit card, ensure you understand the company’s policy regarding benefits and rewards if an account is closed.

How can I avoid having credit cards canceled for inactivity?

An individual can avoid inactivity cancellation by using the credit frequently. An easy procedure to adopt is to put some of your reoccurring bills and charges you expect every month on the credit card. This may include your utility or phone bills. You can also make small charges on your credit card every 3 to 4 months and offset the total balance when you receive a statement. By doing this, you will keep your credit card active and open and your balance wholly paid.

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